Permira has HMV in its sights

US private equity giants KKR and Blackstone have seriously considered separate bids for HMV, the troubled £660m music retailer, which is now being circled by buyout group Permira.

It is understood that KKR worked closely with Roger Flynn, the former chief executive of BBC Technology, for several months on a potential bid last year. No approach was made but Mr Flynn is thought to be keeping a watching brief on the retailer as one of a number of possible targets.

Blackstone is also believed to have drawn up advanced plans for a takeover bid of its own, but dropped them a fortnight ago in the wake of HMV's disappointing Christmas trading figures.

HMV's statement was accompanied by a profit warning, and coincided with an announcement that Alan Giles, the chief executive, is to leave by the end of the year.

Both the HMV music chain and Waterstone's bookstores suffered badly over Christmas, which Mr Giles blamed on discounting from Tesco and other supermarkets, and increased competition from internet retailers.

"In theory, HMV still generates a lot of cash, which is always attractive to private equity," said Nick Bubb at stockbroker Evolution Securities.

"But on the other hand the business model looks to have been very badly undermined at Christmas by the supermarkets and internet retailers."

If Mr Flynn were to proceed with an offer, it would his first foray since leaving the BBC in 2004 with a £301,000 pay-off.

BBC Technology was part of BBC Ventures, which was set up by the corporation's former director general Greg Dyke, to exploit the commercial potential of the BBC's technological expertise. The group was asked to generate an extra £300m for the BBC's coffers but Mr Flynn achieved the target early.